Maharatna CPSE Power Grid to turn ex-dividend soon: Buy after Q3 results?

Dividend Statement of Power Grid Corporation

Power Grid Corporation said in a stock exchange filing that its board of directors has “approved payment of second interim dividend of Rs. 5/- per equity share of Rs. 10/- each (paid-up) for the financial year 2022-23 50% of the equity share capital. The second interim dividend will be paid to the members on February 24, 2023.”

The stock is going ex-dividend on Wednesday due to India’s T+1 settlement mechanism. The Company has set Wednesday, February 8, 2023 as the “Record Date” to determine the eligibility of shareholders for the payment of the interim dividend.

Power Grid Corporation’s Third Quarter Earnings

On a consolidated basis, the company reported a net income of 11,530 Cr in Q3FY23 as compared to Rs. 10,724 Cr was recorded in Q3FY22, representing a YoY growth of 8%. The company posted a net profit of 3,645 crore in the quarter ending December 2022 as compared to Rs. 3,293 Cr posted in the year-ago quarter, representing a YoY growth of 11%. Profit before tax (PBT) of the company reached 3,743.47 Cr in Q3FY23 as compared to Rs. 4,246.79 Cr in Q3FY22, representing a decline of 11.85% YoY.

Total Expenses up 20.54% YoY 7,786.91 crore in Q3 FY23 as compared to Rs. 6,460.20 crore in the year-ago quarter, while the company’s revenue from transmission was 11,055.39 crore, up 7.6% YoY from 10,274.91 crore in Q3FY22. Power Grid reported that its consultancy revenue was 173.63 crore in the quarter ended December 2022, up 0.20% YoY 173.28 crore in the quarter ending December 2021, while its telecom revenue was 209.60 Cr in Q3 FY23, up 13.21% YoY 185.15 Cr reported in Q3 of FY22. The capex plan of Power Grid Corporation is 8,800 crore for FY23.

Should you buy shares of Power Grid Corporation?

After Power Grid’s Q3 earnings, research analysts at broking firm Sharekhan said, “Power Grid has a strong project pipeline of Rs. 47,600 crore capitalized. 20,695 crore in FY22, which will grow in 2-3 years.” Thus we expect 10% CAGR in PAT over FY2022-FY2025E as well as ROE of ~18-19% in FY25E. We maintain buy on Power Grid with unchanged PT of Rs. 265, valuations of 1.6x/1.4x FY24E/FY25E P/BV look attractive given the attractive growth outlook, healthy RoE and dividend yield of ~6-7%.”

Research analysts at broking firm MK Global said, “We maintain buy on the stock, with 24 December TP at Rs.250/share. Over the past 5 years, the average P/B for the stock has generated an ROE of 17-18%.” with a yield of ~1.7x. At a CMP of Rs.213/share, the stock trades at ~1.7x. The stock currently offers a dividend yield of ~7%. Risks include delayed commissioning of under-construction projects and new projects delay in the bid.

Research analysts at broking firm BOB Capital Markets said, “PWGR’s Q3 results were in-line with our estimates. However, given the expected decline in joint venture earnings due to higher interest cost, we have raised our FY23 EPS estimate by 12%.” While cutting FY24/FY25 forecasts modestly, we remain cautious on expansion of PWGR’s transmission network in view of shrinking opportunities and intense bidding competition, but risk-reward after 5% stock correction in last one week Upgrade our rating on the company from Hold to Buy due to favorable outlook.. Our DCF-based TP remains unchanged 251 (of the underlying FY25E P/B of 1.7x).

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.